Patron Capital Partners, a London-based firm that has raised €4.3 billion to date, is marketing its seventh value-added and opportunistic fund, Patron Capital VII, PERE has learned.
The fund is looking to raise somewhere between €1 billion and €1.2 billion, a source said. That capital will be raised in a fund structure with a co-investment vehicle on the side, similar to the firm’s last few vehicles in the market. Patron is aiming to amass between €100 million and €300 million with the co-investment vehicle, which is part of the overall target.
Fund VII is the largest Europe-focused opportunistic real estate fund in market, according to PERE data. The second-largest is AIG’s AIG GRE Europe Real Estate Fund II, with a €930 million target.
Patron previously closed Patron Capital VI on €844 million in 2020, commanding €716 million in commitments in the main fund with an additional €128 million via a co-investment vehicle. The fund was smaller than both Fund IV and V – which raised totals of €1.1 billion and €948.6 million respectively including co-investment capital – in part due to the lack of any site visits during the pandemic. Should the latest fund hit its hard-cap, the vehicle will be the firm’s largest ever. However, Patron has intentionally kept its funds fairly consistent in size to match deployment of around €250 million per annum.
The firm is hitting the fundraising trail after what is expected to be its fastest deployment ever with Fund VI, having already deployed 75 percent in equity. The majority of the overall capital will be deployed in around two and a half years from entering the market. The typical Patron fund has a four-year investment period. It has also almost fully realized Fund V after exiting at the end of the year its £1.8 billion (€2.15 billion; $2.35 billion) investment in Punch, a portfolio of pubs in the UK. Investments in Fund VI include residential assets in Italy, the UK, Spain and Portugal; healthcare properties in Sweden; industrial assets in Germany and offices in the UK and Netherlands. The new fund will continue to focus on Western Europe.
Like its previous capital raises, Patron hopes to raise more than 50 percent of Fund VII’s equity from existing investors – it secured a re-up rate of more than 80 percent in each of the past three funds. The source said that the firm traditionally has secured commitments from sovereign wealth funds and US foundations and endowments, which have favored opportunistic strategies when investing internationally. Patron, however, is now seeking to attract more capital from larger public pensions. Previous investors in Patron funds include Arizona Public Safety Personnel Retirement System and Georgetown University.
Patron typically targets an unlevered net IRR of between 12 percent and 14 percent, according to a March 2022 company presentation. Using loan-to-cost debt between 50 percent and 65 percent on its acquisitions, the firm targets gross returns in the 17 percent to 20 percent range, with gross equity multiples between 1.6x and 2x, per the presentation. Patron has generated gross returns of 17 percent since inception, a figure that rises to 22 percent when beginning the dataset post-global financial crisis.